Before you develop a business strategy that can fuel the growth of your small business, you need to know what is powering your business today. Hidden in your numbers lies the info you need for a business strategy that uniquely fits your needs and will help you reach that next level.
Business Strategy Based on Your Numbers
So what numbers am I referring to? Well, that can differ somewhat from business to business, but it all revolves around your finances. Specifically, where are you generating the most revenue and what portion of your work is most profitable? And how much will it cost for you to grow?
Sales Revenue
To begin, you will need to carefully evaluate your sales.
First focus on your revenue and begin to categorize your sales. Is there a specific market, segment or even customer that is providing the bulk of your sales? Is there an area that is proving easier to sell to?
It’s tempting to go after the areas that are driving the bulk of your revenue, but if those areas aren’t highly profitable, then it becomes very difficult to grow your business. Without a solid profit margin, you will be short the cash you need to move that growth plan forward.
Your Profit
So, once you’ve identified and prioritized those areas that are driving your revenue, it’s essential that you dig deeper to find out where your profit comes from.
It’s critical to calculate your profit margin so you have solid numbers showing exactly what products or services are making you money.
Calculating your net profit margin and gross profit margins is key.
Don’t forget to calculate the cost of acquiring each customer so that you can include that into your evaluation.Now that you’ve got your revenue numbers in hand and a solid understanding of the areas with the highest profit margin, you can prioritize your sales efforts and focus on a specific market.
Rethink Your Budget Forecast with Business Growth in Mind
Before you head off and begin to develop your strategy for increasing your sales, you need to be prepared for the increased costs that may go along with your business growth.
Your Budget
What are you picturing for growth? How big do you want to be?
Calculate how much it will cost to expand. Do you need more space? More staff? More equipment?
It’s a good time to review your budget conduct some scenario planning to better understand the path to growth and what it will cost.
Exactly how much revenue can you generate with the additional resources you’ve just budgeted into your strategy? How much revenue will each new person provide? How much can new equipment or a new location generate?
These numbers are all projections and there are no guarantees that you meet your expectations. When you’re creating your new budget and calculating the revenue and profit potential of the larger enterprise, I’d recommend that you create a worst case scenario, best case scenario then a most likely scenario so that you are prepared for different eventualities and can evaluate your risk.
Target Market
Focusing your sales efforts on a very specific target market is essential for growing your business. By having those sales goals and focus in mind, it will help you reduce the waste of resources on focusing on non-converting targets.
Options for Growing Your Business
Now that you have a solid understanding of where your revenue and profit comes from and how much it will cost you to grow your business, you can better focus your sales.Here are some options to consider:
1. Sell more to existing customers
Is there a high potential of repeat business?
2. Find new, similar customers
What is a new customer worth to you? How much will it cost you to acquire each? What is the expected lifetime value?
3. Expand product or service offerings
A. Can you offer new products and services to existing customers?
B. Would new products or services allow you to attract a new customer segment?
One more key number to keep in mind that can negatively affect your growth, is your cash flow.
You need to be sure that you have the cash on hand and flowing in at a constant rate to fuel that growth. Otherwise, you could end up in a situation where you need more resources to fulfill your new sales and have no way to pay for them.
Growth can be risky if you don’t know your numbers inside out and have a business strategy that brings you profitable sales and sustainable path to grow.
__
Forecast Your Cash Flow, Revenue and Profit in the Ultimate Scenario-Modelling Tool to gain confidence, clarity and insight into your business.
Dryrun ties automation with unmatched flexibility delivering clear, powerful and accurate forecasts in a fraction of the time spent in spreadsheets.
Book your DISCOVERY CALL to learn about the Dryrun advantage or start your FREE TRIAL today!
Dryrun - A better way to run the numbers.
